January 16, 2010

Could Microsoft benefit much from Google leaving China?

SAN FRANCISCO (MarketWatch) — Kai-Fu Lee, who’s overseen operations for both Google Inc. and Microsoft Corp. in China, posted a cryptic message on microblogging service Twitter the day after Google made its recent, startling announcement that it might exit the Chinese market: “A captain would never run away from his duty, if he knew the ship was sinking.”

Microsoft isn’t likely to enjoy the same word-of-mouth boost that helped Google gain its significant — albeit second-place — market position in China, according to Peter Lu, an analyst with Beijing-based China IntelliConsulting. “Google is still viewed as a more technologically sophisticated Chinese search engine than Baidu,” he said.

“The reason that Google failed to gain more market share from Baidu is not because of its search technology,” which is widely favored, Lu added. Instead, Google has suffered from shortcomings in local advertising and promotion. “China is not a technology-driven market, and word of mouth is not very effective,” the analyst elaborated.

Microsoft unveiled its revamped search engine, Bing, in May. It was introduced in China shortly thereafter.

“Its brand awareness is very low and market share is tiny,” Lu said of Bing, pegging its share in China at less than 1%. “Bing is so small that the government doesn’t even notice it.”

Microsoft has committed a significant amount of money to promote Bing worldwide, though it’s faced some specific challenges in China. Like Google and others, Microsoft must voluntarily censor politically sensitive search results there. It also has encountered local hurdles in marketing Bing.

Last summer, it was noted that in Mandarin Chinese, “Bing” could mean “ice,” “frozen” or “sick.” Microsoft said it was aware of the possible interpretations, and took pains to select a Chinese character to use with the brand that ensure a pronunciation meaning “certain to respond.”